Greater attention is being focused on the practice of double brokering. In many cases, it does little harm to carriers. But when the sole intent is to defraud customers, it can prove to be devastating.
Double brokering occurs when a legitimate broker decides to give a load to a second broker, who then finds a carrier. Fraud enters the equation when the second carrier is not legitimate and has no intent of ever paying--submitting its own invoice to the first broker, collecting payment and then disappearing.
The practice has become more widespread in the past two to three years, especially with the advent of the Internet, which removes any paper trail and makes it far easier to defraud an unknowing broker. The fraudulent broker repeats the process until they feel people are getting on their trail, but even that doesn’t necessarily stop them.
“Once they are about to get caught, they form another company and do it again,” Mike Woods, credit collections manager for Apex Capital, told FleetOwner. Apex said they had a client lose over $100,000 through a company they estimate defrauded over a million dollars from various brokers.
So even though the number of instances of the fraud is still minimal, it can be a fatal blow--especially to a small carrier. With the freight market still tight, smaller carriers have become more aggressive and willing to take risks. When they see a deal they can’t pass up turn out to be fraud, it could lead to a loss of substantial time and money.
According to Apex president David Baker, “The best defense is to use reputable brokers, and to check credit. If the load looks too good to be true, it probably is,” he told FleetOwner. Their system acts much like credit card defenses for theft, using predictive factors to identify possibilities of fraud and then make inquiries about the suspected broker.
Baker also suggests clients should ensure they have the carrier’s name on the bill. While it is not a guarantee they will not defraud the company, it may leverage their ability to get paid. With a number of cases coming to light in the recent past, many larger brokers have become more adept at dealing with double brokering, having been burned in the past.